This from The Rude Awakening:

The American people voted for change…and now they’re going to get it. But the change they get may not be the change they expect Obama to deliver. Something more sinister may be coming our way.

After an historic election and inauguration, president-elect Obama will enter office with a huge list of challenges. These challenges — from a contracting economy to large-scale corporate bankruptcies to soaring national indebtedness — will…

First of all, let's take a deep breath, because this was a truly historic election. And while I was disappointed in the general lack of substance from both candidates over the course of the campaign, there are two things that this election has done for the United States on the most broad level that are undeniable. First, despite the focus on the negative dimensions of the campaigns, the tone of the debate was a fundamental shift toward less partisan rancor and more the interest of the nation. We had gotten ourselves in a Bush/Clinton rut that was fundamentally dysfunctional. And hopefully the U.S. is back on track now and can focus more clearly on the national, as opposed to the partisan interest.

Second, this election will be a boon to how the United States is viewed abroad. Many Americans have no idea of how the U.S. is regarded overseas. Let's just say, of late, the answer has been "not so positively." But I think an Obama election changes that overnight (particularly in Europe and the Middle East). If you don't believe that, take a gander at the headlines from abroad this morning:

http://www.elpais.com/global/

http://www.timesonline.co.uk/tol/news/

http://www.lemonde.fr/

http://www.arabnews.com/

http://www.spiegel.de/

I think it is fair to say that at least for a time, there will be a bit of a honeymoon for the U.S. abroad, and for Obama internally. But very soon, the reality of enormous fiscal and political crises at home and abroad will strike home.

There was nary a mention of the looming $13 trillion deficit during the election, save perhaps McCain's claim that he'd cut spending on "everything" but the most popular (and biggest-ticket) items in the budget. No numbers, no specifics from either. But both were beating the drums of cutting taxes.

Don't count on that promise to hold.

I think that to the degree that there's much of a difference on fiscal policy with Obama vs. McCain, it will include more spending. I do hope some responsibility creeps into the budget, because right now, the U.S. is like a 12-year-old kid with a credit card, completely out of control. And we've basically put our fate in the hands of other countries, who, if they decide to stop funding our binge spending, could send the U.S. dollar into a money-printing, hyperinflationary, dollar-crashing spiral.

So yes, Matt, in that instance, I'd stock those gold bars and Campbell's soup (with maybe some Chinese yuan) in your South Dakota bunker overlooking your potato field and vegetable garden.

Specifically for our portfolios? Here are some thoughts (mostly pretty obvious):

• Alternative energy. This sector should experience a boon if Obama pushes for a "Manhattan Project" on energy à la T. Boone Pickens.
• Traditional energy. With focus on the American consumer, don't be surprised if Obama puts the brakes on profits for U.S. energy companies if oil prices again rise. Think "windfall profits tax."
• John Dvorak also thinks that will translate to foreign energy companies doing better in his "How to Obama-proof your portfolio" article.
• Generally, looking at currencies, consensus certainly at our commodities conference, was that we are entering a seriously dollar-bearish environment after perhaps a bit more de-leveraging.
• U.S. pharmaceuticals and Health Care may take a bit of a breather on the road to nationalization. But I still wouldn't get in the way of that demographic freight train.
• Real Estate and Financials—who knows? I'm not sure I understood EITHER candidate's policies on dealing with the crises. Regardless, it feels to me like we've got a tough road ahead of us near term, but that things will stabilize. Don't think that an Obama administration will be shy about bringing down the regulatory hammer on Financials. So, though it's been pulverized already, you'd have to be more bearish on that sector under Obama than McCain. But really, who knows—it depends what team he brings in and how competently they address our issues.

In short, it's a breathtaking day for America, and for the world. But there are a lot of very serious challenges ahead for Obama and for the United States of America.

The low price of the day was set at the Comex close. All in all, the gold price was dropped $60 in a thirty four hour period…from a high of $776 at 4:00 a.m. New York time on October 30th…to the low at the Comex close at 1:30…

The low price of the day was set at the Comex close. All in all, the gold price was dropped $60 in a thirty four hour period…from a high of $776 at 4:00 a.m. New York time on October 30th…to the low at the Comex close at 1:30…

The crash in stock prices has most investors spooked. But it's worth keeping you head while others lose theirs, says Strategic Investment editor Dan Amoss.

Right now, there are some very healthy resource stocks are shockingly cheap. What Dan calls "screaming bargains."

This from Whiskey and Gunpowder:

It amazes me how long this environment of panic has lasted.

Last Thursday was one of the most violent days I’ve ever experienced in the markets, including the bursting of the tech bubble. Quality companies in the oil services, coal, steel, and agriculture sectors were liquidated in violent fashion — many of them down 20% in a day and 50% over the past month.

These are real companies performing vital functions necessary to keep the lights on and food on shelves, not speculative internet stocks.

The list of victims includes companies that are very likely to deliver good earnings over the next few years. The list includes several of the stocks I’ve recommended in past issues of Strategic Investment, and still follow closely.

If you’re a long investor, there are some screaming bargains out there — unless, of course, half of the world’s population stops using food, electricity, and oil. I doubt that will happen in a world of unfettered deficits and central banks, but anything’s possible. I’ll have more to say about this in an upcoming issue of Strategic Investment.

For immediate ideas, I strongly recommend considering the long list of bargains that my colleague Chris Mayer has recommended in Capital & Crisis and Mayer’s Special Situations.

It’s mind-boggling how cheap some of them have become. Chris is an excellent stock picker. He goes to great lengths to find safe, cheap investments.

The money managers that survive this environment will probably look to own some of the dirt-cheap stocks in the energy, commodity, and agriculture sectors, rather than expensive stocks that thrived on spending from home equity loans.

Once this credit market panic subsides, I expect we’ll see this shift in sector focus.

Fund managers will have to start distinguishing between earnings that resulted from fake, bubble-induced consumption, and earnings that resulted from real, sustainable demand.

I’m looking forward to earnings season, when analysts and fund managers can finally get some guidance about which companies’ earnings will hold up best during this recession.

Even the best fund managers and stock pickers in the world are down for the year. A few of these managers saw the credit crisis coming, and made nice profits shorting financial stocks. But the SEC’s totally arbitrary rule changes in recent weeks have created an environment that’s very difficult to navigate.

The SEC’s short selling ban has not changed much, other than taking efficiency and liquidity out of the market. For example, Allied Capital was on the “do not short” list. Yet it crashed earlier this week upon announcing the bankruptcy of Ciena Capital. That was a case of long investors all trying to squeeze out of a narrow door of liquidity. It was not a “short attack.”

Uncertainty about the banking system is causing this panic in the credit markets. Innocent bystanders are suffering from the fallout from this credit bubble.

For example, I’ve read several accounts of hedge funds whose assets are stuck in the black hole that is Lehman Brothers’ balance sheet.

I’m not referring to people who own Lehman bonds, I’m referring to funds that had custodial agreements with Lehman. Custodial agreements are supposed to ensure that Lehman could only execute trades for the pool of assets under its custody — not take actual possession of the assets.

It seems that in the days and hours before declaring bankruptcy, Lehman moved certain assets — many of which it did not own — to its subsidiaries all around the globe. Now, hedge funds with no perceived credit exposure to Lehman are joining the line of creditors, fighting to get their clients’ assets back in bankruptcy court.

This total destruction of confidence in counterparty risk is the reason why credit is drying up. So what has the Federal Reserve been doing as the lender of last resort?

It has nearly doubled the size of its balance sheet in the past few weeks. The Oct. 3 issue of Grant’s Interest Rate Observer describes:

“After a flat-footed start, [the Fed] had shown its ability to degrade its balance sheet by selling off its Treasuries and acquiring dubious mortgages. But it had not really put its back into dollar debasement. The sum total of its earning assets, i.e., Reserve Bank credit, was rising at year-over-year rates of just 3% to 4%. Where was the push to print up enough dollar bills to smother the debt crisis of 2007-8 — assuming the problem was susceptible to smothering through money printing?

“Mystery solved: Reserve Bank credit is suddenly flying. It surged by $203.6 billion, to $1.135 trillion, in the banking week ended Sept. 24. And if Merrill Lynch’s guess is on the mark, it has soared to $1.730 trillion in only the past few days, a near doubling since May 2007 [emphasis added], when the latent crisis became manifest.”

After the panic subsides, the Fed will rein in much of this new money.

Right now, banks are “stuffing it under the mattress,” so to speak. Banks and individuals are crowding into the perceived safety of Treasury bonds. That’s why consumer prices aren’t immediately rising; private market credit is contracting as fast as the Fed’s balance sheet is expanding.

The Fed will always lend when no one else is willing to do so. “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost,” said Fed Chairman Bernanke in November 2002. This means that there will always be paper money available to lend. However, the U.S. dollar is getting debased on an unprecedented scale.

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“Bailout” Ben Bernanke may be set on destroying the value of your savings, but you don’t have to stand for it.

A lot of Americans are already seeing their hopes dashed as the credit bubble deflates and the wealth they thought they had in stocks and real estate disappears.

It will get a lot worse for them when they find their dollars only buying half the food and fuel they used to.

Don’t be fooled by the dollar’s recent surge… the fix is in thanks to the Fed. Devaluation is inevitable. Make sure you protect your savings before it’s too late.

Read this special report for details…

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The printing press may be the only way to prevent a self-sustaining credit panic, but it doesn’t come without a price; it lowers the U.S. dollar’s stature even further in the eyes of our foreign creditors.

I’m betting that government inflation will defeat private market deflation.

However, when the dust settles, I expect the Treasury and Fed to have its own set of negotiations with foreign creditors. The obligations they are assuming and monetizing are simply too enormous without inciting a potential panic among our generous foreign creditors. Maybe we’ll see a Bretton Woods-type agreement in 2009 — one where the U.S. dollar is devalued by 50% against certain foreign currencies overnight.

Source: A Few Great Apples